added to 84-85 CBA stipulated a team could resign one player that would put them over the salary cap. hope was that rule would aid small market teams in retaining their players. players can become FAs, but incentivize remaining with current team.

Term

2 clauses made free agency ineffectual after the merger of the ABA and NBA

Definition

Rozelle rule and right of first refusal

Term

Rozelle Rule and Right of first refusal

Definition

Rozelle: any team that signed a FA had to give compensation back as determined by commisioner

Right of first refusal: meant that the team losing a player could match any offer. kept FA bids low as teams didn't want other teams driving up prices

national and local media money + gate revenues (more than 80% of NBA revenues)

Term

1991 NBA players union did what?

Definition

brought a grievance against league claiming owners were hiding money (keeping salary cap artificially low). Union must always be aware how teams are reporting money.

Term

Charlie Grantham

Definition

One time head of NBA players union but fired for stealing money.

Term

Simone Gourdine

Definition

Replaced Grantham, had been working in commissioner's office...negotiated the 95/96 CBA which included 3 new additions (weakening of Bird Exception, got rid of mid-level exception, implemented 7 year max on contracts)

Term

NBA CBA of 95/96 additions (3)

Definition

1. weakening of Bird Exception so a player had to have spent three years with team to qualify (previously only 1). 2. got rid of Mid-level exception,which had been in place to create a "middle class" in union. 3. implemented 7 year max on contracts and restricted balloon payments so a contract could not have an annual increase greater than 20%.

Term

1998 player work stoppage because displeased w/gourdine's CBA. New deal negotiated by...

Definition

Billy Hunter (still union leader). Unhappy with the stratification in union as a result of new middle level. John Stockton leaked union info to Larry Miller (jazz owner) indicating disarray of union

2. spillover is how much greater the ratio of Expected DGR/total revenue is from one year to the next (take additional percentage of EDGR and add to salary cap)

3. salary cap fluctuated based on ratio of player compensation/DGR, it would increase if ratio was below .6 and increase if it was above .67...salary cap steadied out at around 62/63% (no team allowed below 50%).

Term

There was an incentive to renew the deal because in last year there would be no salary cap (incentive for owners). for players, you couldn't reach free agency until six years (as opposed to four). other provision is that contract can't go beyond two years of CBA, so limited contract length

Definition

franchise tag, team gets right to resign free agent if they pay the player the average of the top 5 salaries at his position

2. transition tag, sign player for average of top 10 salaries at his position.

Term

Current contentious points of NFL CBA: (4)

Definition

1. owners now want firm rookie scale (pay according to draft pick

2. nfl doesn't guarantee contracts...nfl players get signing bonuses instead...signing bonuses can be manipulated so that the cap hit for one year is diminished

3. players only get medical benefits for 5 years after retiring, do not want to extend to 18 game season...to qualify for medical benefits, have to be in league for 3 years

4. owners get 5% off top for league costs, and players give owners a credit to build stadiums.

Term

2006 additions (4)

Definition

1. DGR + spillover turned into total revenue

2. player's share reduced to 57% then 59%, then increase above 59%, any team that went above had to give back the next year...trigger system

3. overall, players got a little more money and owner's had more security

3. additional trouble: owners against revenue sharing as some teams get public funding, while others build own franchise with private money(i.e. Kraft vs. Cinncinnati)...agree on reducing players' base by 18%

4. revenue does not equal profit!!!

5. currently: 5% off immediately, stadium subsidies and players if building new stadium, 1 billion taking off top

Term

NHL

Historically had FA for players in league 10 years or older than 31

in 1980...

Definition

introduced arbitration and salaries exploded

Term

Bob Goodenow

Definition

was NHL commssioner (released figures of players' salaries for arbitrators)

Followed by two lockouts...eventually reached an agreement in July 2005

NHL has instituted a cap since the last lockout--is a range and salaries have to fall in that range...escrow...estimated and adjusted each year---insures no team goes over a certain amount-no need for a luxury tax.

Definition

Term

Labor RElations/ INsurance

Definition

Teams offer longer and longer contracts because of competitive nature teams took out insurance policies on players. Insurance companies realized they were exposed after 9.11 and the steriod era (people getting hurt easier) started to offer less covereage----teams did not see it reasonable to insure a lot of players why leagues don't self insure-would benefit teams with most expensive and longest contracts.

Solution: make teams contribute to fund based on contract lengths---no salaries would allow teams to take more risk.

Term

Why rich people don't get a long about the salary cap

Definition

owners can't agree because they come from different markets; union politics---agents want to have a job---negotiations would be minimized if there is a salary cap...human nature everyone wants to better themselves and make more money.

Term

Labor MArkets

Definition

pay people based on MRP

lowest salary with no free agency--reservation wage of player (opportunity cost)

highest salary with no FA = MRP

highest salary with FA = MRP

lowest salary with FA-$1 more than the next highest offer from another team...MRP is easiest to tell in baseball.

Term

MRP in baseball

Definition

TR of MLB = f(win%, win%t-1, market size, facility)

you can calculate the marginal value of a win and then you can dertermine how much each person contributes to that win

pitfalls of measuring MRP:

1) have to select best measurement of each category

2) imprecision in stats, because doesn't account for performance of other players + situational events (e.g. player's health, team chemistry)

3) relationship between categories may not be linear, hard to capture non-linearity of sports

Term

Discrimination??

Definition

1) owner's discrimination--paying minorities less, have discr. coefficients (would be better off if not discriminating)

2) co-workers discrimination -- dissipates over time

3) customer discrimination -- minorities offer less MRP, and therefore get paid less, no market pressure that can get rid of this type of discrimination.

Term

How to tell discrimination?

Definition

look at MRP and compare it to the salary, salary = f (race, perf) used to be case that minoriteis not hired as often...now they are hired, but what about salaries??

2.having teams consistently at the top is not necessarily undesirable: adds incentinve to beat them, they might be in a larger market...

Definition

so in particular, the bottom teams are important to focus on, and one is not sure if the division between top and bottom teams would be even worse without revenue sharing (i.e. cincinnatti reds)

Term

Sports as part of US economy

Definition

MLB 2010 revenue was 6.5 billion (.0005% of US GDP)

but important to Amerians...public good, can't exlucde, can stil enjoy a team without ever paying a dime or going to a game.

sports create a sens of community

demand for sports is inelastic, meaning it price is insensitive and has a vertical demand curve

Term

The most special part of sports economics: one team cannot meet the dmenad...must be some balance (10 NFC champs in 10 years)...a player's salary will be there MRP, because we can quantify sports players, we can test economic thoeries.

Definition

Are sports isolated from economic downturns...no not completely, attendance strong, although NFL has cut jobs and secondar market ticket prices have dropped.

TOM Hicks filed for bankruptcy (used to own half of Liverpool)

Term

Business Model change of early ninetiesL

Definition

Larry Luchino at forefront of movement

moved camden yards to downtown baltimore...people would go after work, businesses would buy suites, spend dough...businesses are now more willingly to spend a lot on in stadium ads.

NFL is different b/c of the fact that there is only one game a week.

Luchino is important --zimbo has a hard on for him, the suites at stadiums are often the first things businesses cut

Term

Marvin MIller

Definition

was first person to organize baseball players into a labor union and in 1972 he was at the head of their first strike

Term

assume that firms maximize profits...what is an owner's objective function?

win a championship and remain fiscally sound (winning restricted by breaking even), positive popularity (increase in ego), owning a sports team is fun, buesiness contacts and building brand strength,

Definition

Term

short term vs. long term profit max

Definition

"gentrification of the ballparks" -- moving stadiums downtown, made tickets affordable for middle class, open stadiums for warm ups...younger kids, is this a long run solution?

Term

when did baseball become national pasttime? 1881 american association charged 25 cents a ticket, allowed drinking at games, played on sundays and beer magnates sponsered it. national leauge used to be only league.

Definition

does an owner want to max operating income or all investments related to team? why did tom hicks pay Arod 252million?, hicks is thinking that having arod will raise the value of naming rights, i will be able to sell x many t shirts ,my other businesses will profit from a rod, etc. Japanese use baseball advertising, make loss with teams.